Feeling The Startup Scene Shaking In Wellington

I arrived in Wellington just in time for the aftershocks from the 6.6 earthquake that struck New Zealand's capital city this past weekend. The city was empty except for some stray sightseers while office buildings and churches were on lock down, and storefronts were dark.

Yet Wellington's unique entrepreneurial spirit was on show at a Startup Weekend event held at a local university building said to be the safest structure in town. Here, entrepreneurs scurried about to dream up a winning startup idea, build a team, develop a web site and think up a business plan. I was particularly intrigued by a startup that seemed destined to win in conservation-conscious New Zealand, with its mission of buying up small parcels of land through a crowd funding scheme to conserve for future generations.

New Zealand is keen to create a Silicon Valley-style innovation culture, like many other markets worldwide to help diversify its economic base -- in this case, wine, dairy, produce and tourism.

It's true what they say about Wellington, it's a bit like a miniature San Francisco with its hills, harbor, ferries, sailboats and even a cable car. I found that the city has a creative buzz like the Bay Area, too.

I met with Nick Churchouse, director of a business incubator called Creative HQ, which helps startup companies get on a growth path well beyond Wellington. Founded in 2003, Creative HQ is fulfilling its mission, housing startups in a cool co-working space in central downtown and sending 88 ventures through the incubator and out with a solid economic impact. Creative HQ also has crafted a five-week startup session for entrepreneurs to figure out whether their idea is worth sinking all their time, energy and cash into the kickstart project.

New Zealand has no shortage of such incubators and is not weak on a do-it-yourself kind of style that is a must for startups. What it does lack is funding sources. There's almost no venture capital, Churchouse notes, although a group of angel investors often share deals. There's also a handful of Silicon Valley investors that have begun sniffing out tech deals here, PayPal alum Peter Thiel and his Valar Ventures being one.

Accounting software startup Xero is one of Thiel's finds in New Zealand, and a role model for future startups. I visited Xero's (sounds like zero) loft-style headquarters in Wellington not far from Aotea Quay, where the cruise ships depart.

Founded in 2006, the company has listed on the New Zealand Stock Exchange and the Australian Securities Exchange, and the market cap for this still relatively small ($64 million in annual revenues) has reached $2.5 billion! No wonder CEO and co-founder Rod Drury is an iconic figure here, and not just for Xero but other successful startups too.

Philip Fierlinger, a founding staffer, explained to me how the software was designed to be both fun and easy to use for doing accounting chores that most people detest. The software was developed from the start as a cloud-based service before the cloud went mainstream.

With those points of differentiation, CFO Ross Jenkins says Xero has been growing by 100% yearly. The staff size almost doubled last year to 507 employees. Jenkins says the continual challenge is to invest ahead of the business to keep up with its scale -- now some 193,000 small business customers -- and to expand internationally beyond English-speaking markets. The goal is 1 million purchasers of its software, mostly through referrals from accountants.

Having raised about $110 million from startup investors -- Craig Winkler, a co-founder of rival Australian firm MYOB is one -- and gone public in Australia and New Zealand, the next step in the growth path could be a public listing in the U.S. The timing could be within two years.

New Zealand needs more startups like Xero to get on the global tech map, and yes, more are sure to come along, once more venture capitalists discover this windy destination down under. Stay tuned.